Union Budget 2012-13: Oil companies demand tax incentives

NEW DELHI: In its major demands for the Union Budget 2012, oil companies have demanded a slew of tax incentives, including income tax holiday for natural gas production and extending the same for oil refineries by another five years.

Petroleum Federation of India (PetroFed), a body comprising almost all public and private sector oil companies, sought seven-year holiday for payment of income tax to all refineries that are commissioned by March 2017.

Akhil Sambhar & Taranpreet Singh, Senior tax professionals in member firm of Ernst & Young Global, said, "The tax holiday provision for E&P companies should be amended to allow them a flexibility to claim such seven years tax holiday in a block of 10 to 15 years, similar to tax holiday provision for other infrastructure sectors like power."

Industry chamber Assocham, siad that provision of section 80-1B (9) of the Income Tax Act should be amended to extend the period of seven years of tax holiday to 10 years, adding that companies be allowed to choose the period during initial 15 years of operations. "During the initial seven years, companies have large expenditure to set off and hence the actual benefit of tax holiday does not reach them," Assocham said.

This period is less than the tax holiday period available to companies in infrastructure sector like power generation and distribution.

Petrofed also suggested abolition of the National Calamity Contingent Duty (NCCD) of Rs 50 per ton, saying the levy was imposed on domestic and imported crude oil in Union Budget for 2003-04 for one year but it has not yet been done away with.